Sure seems like Chris Dodd took a bullet for the Obama team, and for the life of me I can’t figure out why he is the fall guy in all of this. He, after all, was the one who wanted the toughest rules in place, and then was negotiated downward by the folks at Treasury. Here is his latest statement:

“I’m the one who has led the fight against excessive executive compensation, often over the objections of many. I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG. Let me be clear – I was completely unaware of these AIG bonuses until I learned of them last week.

“Reports that I changed my position on this issue are simply untrue. I answered a question by CNN last night regarding whether or not a specific date was aimed at protecting AIG. When I saw that my comments had been misconstrued, I felt it was important to set the record straight – that this had nothing to do with AIG.”

That makes sense, is consistent, and the only thing missing is who it is at Treasury that set him up for the fall. And why. When all hell broke loose with the AIG stuff this week, the folks over there sure knew where to stick the long knives and quick, and Dodd looked to have no idea what hit him.

*** Update ***

Al Giordano says nonsense, and I am being played the fool. Which should not be surprising to anyone at all.

Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.

In an interview with CNN’s Ali Velshi, Geithner said the Treasury Department was particularly concerned the government would face lawsuits if bonus contracts were breached.

am I missing something? I am not being facetious here but I did not see a throwing under the bus of Dodd by Obama. Didn’t Geithner step up today and say it was his responsibility? And didn’t Obama do the same? I guess I missed the part where the White House threw him under the bus (I seem to remember reading somewhere, maybe Giordano’s The Field, that no one in the WH did any such thing). Just asking because there seems to be much misinformation going around the intertubes these days and I can’t keep it all straight.

Dodd blinked. Someone got to him and he took the provision out. I don’t believe for one minute that he’s an innocent in all this. I don’t believe for one minute that the AIG link is merely tangential. He’s always been the head cheerleader for Wall Street and the bloated exec salaries. I know it’s a current wingnut blame-game gotcha, but I’m tending to believe this one.

Some cube jockey at Treasury opining that "we could get sued" isn’t legal or credible grounds for backing down. And since they’re not naming names, that’s the only assumption we have to go on.

The problem is one of perception. Dodd claims he was the one "fighting" for the tougher restrictions. But he’s also the one who capitulated–in secret–to strip them out. It doesn’t look good.

If he believed in stronger restrictions, he should have stuck to his guns and done what was right, not what Treasury wanted. I like Chris Dodd a lot, but I don’t have sympathy for him here, just like I didn’t have sympathy for him w/ his nice Countrywide mortgage terms.

@henrythefifth: Another name for capitulation in this case is “negotiation.”

As Dodd said repeatedly yesterday, “I wasn’t negotiating with myself.” I honestly don’t think he had any idea about the AIG bonuses when he negotiated the amendment downward, which would explain why he agreed to it in the first place and seemed blindsided when he was accused of inserting the “AIG loophole.” AIG bonuses just weren’t in the picture when this was going on, at least for Dodd.

You know, I’m giving Geithner a pass on this and Dodd too, though I doubt the press or public will. Don’t much like Tim G, but in this instance, I’m convinced he was focused on the pragmatic choice to keep the big picture of fixing the economy first. He’s not a politician and likely didn’t give the politics a second thought. Dodd is a politician, but understandably gave way to a sincere request. though he did keep in the bill a clause that bonuses could go forward "unless they are not in the public interest" . Kind of vague, but could be used, maybe, to get the money back.

The dems knee jerk reaction to passing a special tax, was not only dumb, and maybe not legal, it also gave the wingnut’s the meme of confirming their perennial allegation that democrats are dangerous taxers.

I read an article in a back issue of Haper’s today, a first person story of cleaning up foreclosed homes after the losers had been run off by the sheriff. The stories about the homes and the people were interesting, but I came across this bit of first person information that set my tar to boiling.

It seems that when the banks foreclosed on loans held in the secondary mortgage market, the very ones chopped up for the now toxic mortgage-backed securities, the holders wouldn’t sell them for a loss. The writer personally witnessed the banks turning down real offers from real buyers that were less than the loan but still not bad. The securities holders told the author they couldn’t sell for a loss because it would devalue the security. Instead, they defaulted the note and sold the houses at auction for 80% of what the buyers offered. They did this because it triggered a default of the security which meant the insurance company had to pay off the credit default swap. So the security holder got the full value and guess who is now holding the proverbial bag of toxic assets?

Yeah buddy, they sure got us good didn’t they.

Oh yeah, I forgot to add, guess who is buying up those houses at auction? Yep, the former and supposedly bankrupt owner of Citywide.

it also gave the wingnut’s the meme of confirming their perennial allegation that democrats are dangerous taxers.

Doubt it. If the wingers want to start crying about it all Dems have to do is state that since no one else is doing a damned thing but pointing fingers every-which-way, at least they’re trying to get the money back. All the repugs want to do is get in the way.

They did this because it triggered a default of the security which meant the insurance company had to pay off the credit default swap. So the security holder got the full value and guess who is now holding the proverbial bag of toxic assets?

So, basically, getting help to "dead-beat" homeowners keeps them in their homes, keeps the banks afloat and keeps CDS away and money away from groups like AIG?

Why is Dodd taking orders from Treasury? Congress is a separate branch and should hold the Obama administration accountable. Read Al Giordano’s latest post–AIG advertised the fact that they were giving out bonuses this was not a state secret. Dodd should have known and should not have weakened his measure.

Am I really the only one that watched the last eight years, and came to the conclusion that the government unilaterally voiding contracts and writing legislation to target enemies is a bad idea?

First of all, In every job I have ever had where bonuses were available, they were paid based on meeting quotas or objectives. I’m having a hard time imagining what objectives were met at AIG, unless "worst financial debacle in history" was one of them.

As far as being contractually obligated to pay the bonuses, I would argue those contracts became null and void as soon as their company failed and the taxpayers started footing the bill.

@J. Michael Neal: I don’t like Congress’ posturing and phony populism even if it is directed at the correct target. There are better ways to get the money back than to let Congress use coercion AND pretend they care.

But if by the tone of your post are you asking do I mind finding a way to get the taxpayer money back the answer is no, raise the guillotine.

Why is Dodd taking orders from Treasury? Congress is a separate branch and should hold the Obama administration accountable. Read Al Giordano’s latest post—AIG advertised the fact that they were giving out bonuses this was not a state secret. Dodd should have known and should not have weakened his measure.

Question: during the resultant litigation, could AIG still function and debts be unwound? And how long would the legal proceedings take?

First of all, In every job I have ever had where bonuses were available, they were paid based on meeting quotas or objectives. I’m having a hard time imagining what objectives were met at AIG, unless "worst financial debacle in history" was one of them.

As far as being contractually obligated to pay the bonuses, I would argue those contracts became null and void as soon as their company failed and the taxpayers started footing the bill.

My guess is that you’ve never worked in the finance industry. "Bonuses" that are really salary are very common, and almost universal when you reach the top of the pyramid. There are reasons they prefer to call it a bonus, but that’s not what it is.

The problem with your second paragraph is that, legally, AIG didn’t fail. Unless a company actually goes into bankruptcy, contracts don’t get voided. The choice is to let AIG truly, legally fail, and deal with the utter chaos that would ensue, or honor contracts. Pick your poison.

I think treasury came to him and told him to soften the provision to deal with potential lawsuits, and he agreed, choosing to keep something over nothign.

I agree, to an extent, but Dodd and Congress ultimately held the cards, didn’t they? Obama wasn’t going to veto based on Dodd’s original provision being in there, I can’t imagine. Dodd’s constituents and probably his important contributors are those guys in Wilton, and I think that’s more germane to this discussion – I think Geithner wanted the provision softened, but Dodd did his own math. And I say this as a contributor to Dodd’s presidential campaign.

But if by the tone of your post are you asking do I mind finding a way to get the taxpayer money back the answer is no, raise the guillotine.

I wouldn’t mind finding a legitimate way of getting the bonuses back. Unfortunately, I haven’t yet seen a suggestion for it that doesn’t amount to the government either breaking the law, or passing a thinly disguised bill of attainder. I think people are letting their sense of outrage get the better of their ability to really think through the consequences.

We shouldn’t even let AIG’s lawyers get a piece of this too. There are better ways to get the money back to the taxpayer.

Perhaps I was unclear.

If we had stripped the bonuses beforehand, the affected individuals would sue. And they would use their own lawyers. Whether or not they won, it would take time and resources. My question was whether this cost in time be manageable? Or even if AIG could function during a trial? I suspect that even an expedited trial would play havoc with unwinding AIG, not to mention the financial markets. (But I wouldn’t mind if I could be proven wrong..)

The dems knee jerk reaction to passing a special tax, was not only dumb, and maybe not legal, it also gave the wingnut’s the meme of confirming their perennial allegation that democrats are dangerous taxers.

Exactly. It makes them look like the only thing they know how to do is tax someone.

@J. Michael Neal: AIG will need another "investment" and we can take it out of that. We can’t, and shouldn’t, make the individual recipients cough up the dough, but we can take it out of AIG. You can also bet the farm the no further "investments" will happen with taxpayer money unless this kind of thing is verboten.

Geithner worked for Kissinger and Associates. Go back far enough and you’ll see Kissinger on the board of AIG. This is incredibly complicated and I’m not saying that one thing is connected to another, just that I personally would never work for Kissinger. I think working for Kissinger reveals major character flaws in a person.

So my question is why did Obama put Geithner into Treasury? Was he forced to? By whom? I’d rather have seen someone like Robert Reich do a reprise. How long is Obama’s leash?

@valdivia: Nope, it never was. AIG paid them to stay around and help with the fire sale. I think we all agree that we shouldn’t have paid the arsons to help us put out the fire, the argument that they are just so supersmart fails on the face of the evidence.

I also should have mentioned that another strategy is criminal prosecution under the RICO statutes (though I can’t claim the idea) and using tort law to recoup the bonuses.

Liddy stressed this point – that there were no performance bonuses granted – yesterday, quite articulately.

AIG’s biggest concern was the AAA rating of the CDOs, which I assume they knew was bullshit at the time the CDOs were rated, and they knew it was just a matter of time before the rating was downgraded and the foundation caved in. Downgrading triggers the tsunami of collateral calls. Which brings us back to the rating agency abrogation of duty, and why the fuck are they not testifying every day in Congress?

AIG will need another "investment" and we can take it out of that. We can’t, and shouldn’t, make the individual recipients cough up the dough, but we can take it out of AIG. You can also bet the farm the no further "investments" will happen with taxpayer money unless this kind of thing is verboten.

What’s the point of taking it out of an AIG bailout? Every dollar we don’t give them is just another dollar we have to give them to prevent bankruptcy. What the hell is the point in that?

Obama said early in his administration that, in a fight, if they bring a knife, we’ll bring a gun. Given the political astuteness Obama continues to demonstrate, I don’t think he was just talkin’ smack when he said that.

This is how I see this whole mess:

1. Obama’s treasury man talks the congress folk out of capping bonus pay. It can be reasoned that the amount is piddling compared to the whole tamale. Congress relents.

2. To Wall Street’s delight, they all take the bonuses claiming it as their legal, contractual right and end up looking like the arrogant and greedy hogs they are.

3. News of the bonuses hits the news media with the anticipated public outrage echoed by congress and by Obama himself. Banks raise credit card interest rates thereby pouring gasoline on the fire.

4. Obama takes responsibility for the communication breakdown even though Geithner is technically the pivotal player and so what. There are legal arguments that can be made plus they all know that this will blow over. And,this takes congress off the hook with their constituents.

5. By taking this approach, Obama has very thoroughly and publicly pants the Fat Cats complete with House committee hearings that flush all kinds of bad behavior into the light of day.

6. With public outrage ramped up to 11, Obama has set the stage for the passage of new regulations that are needed for the finance industry, while exposing the abject greed and arrogance of those who ran the country’s finances into the ground.

I can totally see this as an intentional chain of events in order to raise public awareness of financial reality in order to have the needed support to pass new regulations.

The federal courts ultimately held the cards, and they have a tendency to uphold contracts,

Not when circumstances change as drastically as this.

Please explain to me what legal circumstances changed such that the courts would refuse to uphold valid contracts? I can’t think of any.

There is a reason that it takes bankruptcy to void contracts. What people want is for the government to decide that some contracts are valid, and some aren’t. Do people really want the government to have this power? Do you think that there is the slightest chance that the Bush administration wouldn’t use this power for evil?

I work for a large national company. They actually have ‘bonuses’ built in, as part of your salary compensation – the cost calculation is done as a percentage of your salary and recorded as hard-wired employee cost to the company, just as salary is. They are called bonuses, but they aren’t really to my way of thinking.

This year, said company froze raises, but they did not withhold this ‘bonus’ money.

To complicate things, there is an additional pool of money that is also a (much smaller) percentage of your salary, which actually are "bonuses" as commonly understood. They are awarded on the basis of performance, by divisions and to the top performers in those divisions.

@J. Michael Neal: Sigh. We take it out in stock, just like we’re doing as collateral for the bailout loans. And if we want to hit the individuals we should use criminal (RICO) and tort law to go after them.

5. By taking this approach, Obama has very thoroughly and publicly pants the Fat Cats complete with House committee hearings that flush all kinds of bad behavior into the light of day.
6. With public outrage ramped up to 11, Obama has set the stage for the passage of new regulations that are needed for the finance industry, while exposing the abject greed and arrogance of those who ran the country’s finances into the ground.

Hoping this is so; if it stops with this punative tax and little else, then it isn’t worth it.

I guess I took the reader to mean these were not about performance but about risk taking and that the AIG people already knew that the risk was not paying off which is why they wanted to pay these guys.

I don’t think they are keeping these guys because they are smart–heck we saw what the ‘very smart’ physicists did with their fancy economic formulas. It seems to me, that they think only guys who know what is there are the ones that can untangle the mess. I cannot pretend to know if they are right or not. My gut is that these guys need to pay for what they did but focusing on AIG only is a mistake. Why are the rating agencies skating and still acting as if it had nothing to do with them?

I guess what matters most to me is to have a very smart new set of regulations set for the future so that no rating agency or AIG can do this ever again.

This doesn’t really seem to be a case of long range Machiavellian plotting by Obama, or a case of continued ineptitude (on anyones part.. except AIG maybe).

It seems to be a case of a lot of people dealing with a fairly fluid situation by making the best decision that gets the bulk of what they think needs to be done. No one in the Obama administration, or among the Dems seemed to be playing the "my way or the highway" game (Which in retrospect seems like there was a healthy bit of waffling going on there).

So.. IMHO, it was just a lot of banal hashing out of how to keep the economy running with as little drama as possible. Which was probably like performing an emergency limb amputation while spilling as little blood as possible. It’d going to be a lot no matter how you do it, but you still gotta try your best.

Can someone explain to me what the right’s problem with Dodd was in this situation? Was it anything at all, or were they pissed at something else? Today at work, a friend who’s conservative was on one of his nutty rants–just to give you some indication of how deep the thinking was, he cited Glenn Beck a bunch of times–and while I only listened a little, so as to not draw him into a conversation about this, I heard Dodd’s name mentioned a few times.

I’ll admit, I’m still piecing together this story, as I didn’t read anything about it yesterday, so perhaps I am missing something obvious. But it seems like they are simultaneously blaming Dodd for trying to help keep the bonuses, which is an outrageous waste of money, while insisting that it’s putting us down the path towards socialism/banana republic status to try to rewrite contracts.

I don’t think they are keeping these guys because they are smart—heck we saw what the ‘very smart’ physicists did with their fancy economic formulas. It seems to me, that they think only guys who know what is there are the ones that can untangle the mess. I cannot pretend to know if they are right or not.

Oh, they aren’t the only ones. Certainly not.

But are they the only ones who can do it now, have a better chance of putting out fires before they begin, and can adapt more nimbly, because they aren’t climbing a learning curve? Hm. Different answer all together….

@randiego: Exactly. Its one thing to say "no more bonuses, times are tough" which is what they should have done from the beginning. Its another to say "hey Fat Cat, you shouldn’t have that money so us Congresscritters will impose a special tax just on you" which puts way too much power in the hands of people who only found the populist god last week. We can make AIG give the taxpayer the money back when they repay the loans (if they do, of course), and we can sick the attorneys general on them to see if fraud was involved in acquiring the bonuses to begin with. Then tort law kicks in to recoup damages.

It’s my understanding that the House bill taxes bonuses at 90% if 1) a company got more than $5 billion, 2) the individual has more than $250,000 salary, and 3) this is NOT limited to AIG. I’m guessing that would include oh, Wells Fargo, BofA, Citibank, Freddie & Fannie, etc. Some folks are gonna go ape wild crazy, and I’m gonna love watching them scream. I’ve already emailed my Senators, it’s well past time that they should start living in the REAL world.

I think Dodd changed the provision at the suggestion of Treasury. I think Dodd changed it without any contemplation that it would benefit AIG specifically.
I never thought Dodd changed it to specifically benefit AIG. My (apparent) confusion was with his denial. I thought he denied inserting anything. He says he was denying inserting anything to benefit AIG specifically, okay. That’s completely plausible. I never believed he did that anyway.
Both Treasury and Dodd could have done all of the things they did here with no evil AIG-specific-benefit intent on either side.
I think Treasury had to reveal that Dodd inserted the provision. They had to release that because it appeared as if Dodd was denying inserting anything at all, and it was in there, they requested it, and obviously some Senator put it in there. It was getting stupid. Someone had to say they put it in there.

Please explain to me what legal circumstances changed such that the courts would refuse to uphold valid contracts? I can’t think of any.

Not having access to any of the facts in this case, it would be impossible to make any such overriding statement. Something you should also avoid, come to think about it.

The fact is that contracts get legally declared invalid for a myriad of reasons. One of which is that the circumstances under which the original contract was agreed to have drastically changed. Only the most shameless republican apologist try to dance around and claim that they were entitled to their money no matter what.

@valdivia: Well, they are arguing that the reason they kept them is because they had special knowledge, which I agree doesn’t seem so special at this point.
The math guys who invented the instruments are actually pointing the finger at the Lords of Finance saying they were too stupid to understand the model’s limitations.
Lastly, I agree with you completely that this should be enough evidence that the Lords of Finance need to work from a very, very short leash, i.e. more regs.

But are they the only ones who can do it now, have a better chance of putting out fires before they begin, and can adapt more nimbly, because they aren’t climbing a learning curve?

yep that sounds much more the case to me.

@SpotWeld:
I tend to agree. I think though chess move or not this moment could be used to accomplish this even if it was not planned that way, but as a teaching moment it would require the constant OUTRAGE! screams to cease no?

@J. Michael Neal: The rest of the company still has value and you better hope it does or this money is pissed away. My understanding is that there is still some hope that the taxpayers will get their money back. The mortgage backed securities are still there, we own them, and there is real property at the other end even if it is devalued. So yes, we can recoup the $147 million in bonuses from AIG.

As for RICO, do you really believe that hiding in London shields them from prosecution? You think the Brits are some third world dictator that won’t cooperate? You sure there aren’t international laws that cover things likethis?
Surely you’re not that stupid, are you?

There is a reason that it takes bankruptcy to void contracts. What people want is for the government to decide that some contracts are valid, and some aren’t. Do people really want the government to have this power? Do you think that there is the slightest chance that the Bush administration wouldn’t use this power for evil?

That’s a very, very good point, one that a lot of people have been making. But isn’t the solution, then, to simply spin the derivatives unit of AIG off and force it into bankruptcy, as the guys at The Huffington Post suggested yesterday? That way, the contracts could be changed or voided in a way that isn’t abnormal (as far as I know). Since the government hasn’t been in the habit of essentially owning companies, I don’t see how this is going to really upset the climate for business.

As is now widely reported, Senator Dodd has included language in the stimulus bill that would have retroactively blocked excessive compensation for employees at financial institutions receiving federal bailout money. However, at the request of the Treasury Department and the Obama administration, that language was stripped during the conference session. Senator Dodd was not in the conference session, but the following ten people were:

As for RICO, do you really believe that hiding in London shields them from prosecution? You think the Brits are some third world dictator that won’t cooperate? You sure there aren’t international laws that cover things likethis?
Surely you’re not that stupid, are you?

Since when is RICO an international law? How does someone working in London violate it in this regard?

This is all a distraction.
The bonuses aren’t the issue.
Giethner isn’t the issue.
Either is Dodd or anyone else we want to affix blame to.
The people at AIG (specifically the ones at the London Division of AIG-FP) have dug thier own graves. All of these people are going to jail on RICO charges. And they’re going to take a LOT of people with them. It seems to me that this whole CDS business is a giant case of fraud. And since AIG has its tentacles in a lot of other banks, some high ranking officials at Citi, BOA and the other large banks will be taking thier own perp walk in the not-to-distant future.
I don’t give a rat’s ass how much money you have, or how good a lawyer you get, NOBODY BEATS A RICO CHARGE.
The bonuses are a distraction to keep attention away from the massive, economy destroying fraud our Masters of the Universe committed.
Think Enron when the rolling blackout were occurring. And those fuckers went to jail, didn’t they?

Isn’t it just a bit odd that the same Congresscritters who voted to dismantle every regulatory barrier to people making shitloads of money on abstract financial instruments are professing outrage that people made shitloads of money on abstract financial instruments? Neither political party’s hands are clean in this yet the pols are all pretending to be sans culottes now that people are getting pissed off.

If a group is unpopular and people don’t like them, Congress should act to tax them for their bad behavior.

In case A: substitute AIG bonus recipients for unpopular and unliked.

In case B: substitute homosexuals for unpopular and unliked.

You are such a dick you can’t see through your own hysterical red veil. The whole point of the analogy, you sniveling ass wipe, is that the government should not target groups for special taxes just because the masses don’t like them. If it can happen to AIG, it can happen to sniveling ass wipes too.

No. Force majeure requires an event that is beyond the control of the parties to the contract. The whole reason people want to void the contracts is because the catastrophe wasn’t beyond the control of the parties, and that they are, in fact, directly responsible for it.

I hate to say I told you so, but Greenwald and remember Mona? are all libertarians. Greenwald didn’t give a shit about politics until 2005, and Mona will beat you down with the ‘progressives are Nazis’ theme.

Good to see that some of the hysteria is getting some light.

We’ve got a good president. He’s exactly who he has always shown himself to be. Let’s give him a bit of time.

@J. Michael Neal: Gad your dense. As an American company we can prosecute them under the RICO statutes and the Brits will gladly hand them over, OR we can get the Brits, Germans, French and others bilked by them and use international law. The whole point, moron, is that just because they are in London doesn’t mean they are beyond the reach of the long arm of the law.

It might have something to do with Dodd lying through his teeth on Tuesday to CNN. They didn’t misconstrue a damn thing. He said unequivically that the language was not what he originally put in the bill, that he didn’t change the language and that he had absolutely no idea who did. If he had come out with the truth to begin with on Tuesday then nobody would probably care. But being that he already has some "issues" with mortgages etc he lost major credibility not only for lying Tuesday but also for now coming back and treating people like we are too stupid to remember what he said just two days ago.

Now I realize that some anonymous Treasury people pointed to Dodd’s amendment as allowing for the AIG bonuses but I have also gone back and read the original NYTimes story several times and the truth is the Times story didn’t create this meme against Dodd, instead it was discussions and blog posts that sprung from the Times article that took liberties with what was actually in the article, that started the firestorm against him. In the article all they did was reference the amendment as having a provision that allowed for the bonuses. There weren’t any quotes, there wasn’t an accusation that Dodd slipped it in, and there was no context to how the anonymous Treasury official conveyed the information. Really unless you are looking at it expecting them to be throwing under the bus the snippet about Dodd was basically akin to the Treasury official saying "we even tried this and that didn’t work" as in it comes of as them trying to prove how thorough they were in looking for every possible angle and opening that would enable them to block the bonuses but they just couldn’t find any.

In the end the truth is only the 3 Republicans that ended up voting for the stimulus bill ever really came out for executive compensation caps anyway. But for Dodd we wouldn’t have ANY caps in place even going forward because the only other amendment on executive compensation from Wyden and Snowe got stripped completely out of the bill. Still this isn’t some kind of stealth effort to throw Dodd under the bus. At the same time that Dodd admitted to changing the language someone from Treasury admitted he did it at their urging. It would make not one whit of sense for ANYBODY in the White House to throw Dodd under the bus precisely because it would be too easy for him to do exactly what he did and point to Treasury as having put the pressure on him to do it. This is basically a story created out of whole cloth unfortunately on some liberal and progressive blogs that I enjoy but frankly in a lot of respects are jumping the shark over President Obama almost as much as some WingNut sites.

Seriously just stop for a minute and really think about the premise of the argument. The White House or Treasury tried to throw Dodd under the bus, even though they were the ones who urged him to change the language and there would be no way in hell they could get him not to divulge that information if they burned him. In what world would that scenario make even the least amount of sense? Because the story about Dodd’s amendment got out Geitner basically had to admit Treasury was the one pulling the strings. With all the heat he has taken recently does anybody really believe that the White House would risk this kind of blowback to their Treasury Secretary just to throw Dodd, who as far as I can tell has been very supportive of Obama thus far, under the bus? And the motivation would be…..Geitners tired of his job already?

Sometimes a story is just a story and not a shot across the bow or a smack in the face, or a kick in the balls.

But isn’t the solution, then, to simply spin the derivatives unit of AIG off and force it into bankruptcy, as the guys at The Huffington Post suggested yesterday?

That’s just another way of doing the same thing. You aren’t allowed to take only a part of an entity into bankruptcy. Those contracts were entered into by AIG, and, under bankruptcy law, any attempt to shelter assets from creditors isn’t going to fly, and it shouldn’t. That’s still the government deciding which contracts it wants to honor and which it doesn’t.

If you take AIG into bankruptcy, the first thing that happens is that the derivative counter-parties seize the collateral that has already been pledged to them. As far as I can tell, the whole reason that the government stepped in in September is because AIG had pledged all of its assets to collateral. So, if you go to bankruptcy, there is nothing there. The life insurance policies that AIG wrote are worthless, because they aren’t secured by collateral.

@Hunter Gathers: Precisely, thank you. Congress’ dog and pony show, their phony populist outrage, is just a distraction. I suspect that some Congresscritters may have their names pop up in some of these prosecutions.

@bootlegger: Christ on a cracker, you bring the stoopid and hysterical, get called on it and then double down. We own AIG, we don’t own homosexuals. We bailed out AIG with taxpayer money, we didn’t bail out homosexuals with tax money. I happen to like homosexuals and don’t consider them the pariah you do. Your comparison sucks and so do you.

@Dennis-SGMM: They know whats coming if this goes to criminal prosecutions and there are some nervous congresscritters right about now (maybe even a few in the executive branch but let’s not get too conspiracy eh).

Bravo. Well, only because you agree with me. Me, you and David Schuster.
They’ve been carefully and deliberately dismantling their own authority to act on these entities for YEARS.
It’s difficult for me to listen to them.
I’m not shocked that Treasury wanted a compensation provision inserted. Treasury has a broader goal, and it involves attracting private capitol to buy the bad debt, with a government guarantee. They knew that provision would complicate that. It will complicate that.
Why doesn’t Congress have a broader goal? Then they could duke it out with Treasury, and we could have a functioning executive/legislative type government, with sometimes differing objectives? I think that was the original plan. Three branches? Duking it out when neccessary?

@Just Some (Whistles): What makes you think I hate homosexuals? Some of my best friends are homosexuals and I was pushing gay rights back went it meant a fistfight.
You’re as dense as that other stupid fuck. We own AIG, but we don’t own the people we are taxing. Jesus wept but you can’t see an analogy if its shoved up your ass and held behind your eyeballs.

That’s sooooo pre-9/11. I suppose that you want Congress to reassert its sole authority to declare war, too. Congress has become an institution united only in its desire to avoid responsibility in the interest of being re-elected.

Greenwald has a healthy fear of the executive branch. I just think sometimes it verges on paranoia. They’re not always "scheming" up there are the White House, and Congress are not helpless children that the all-powerful executive branch subverts and abuses willy-nilly.
Or, maybe they are.
In any event, I’m not rescuing Congress from Tim Geithner. They’ll have to fend him off alone.

@bootlegger: If I’m wrong about RICO, have at them. Granted, I really don’t like the RICO statutes, because they are overly broad, and prone to exactly the sort of abuse I’m worried about, but I lost that battle a long time ago. I’m just unconvinced that anyone is going to be able to put together a pattern of illegal behavior that will scoop up most of these people. It’s looking like Cassano definitely perpetrated fraud in covering up the losses in late 2007, but the actual trades don’t violate any laws. That’s evidence that the laws regulating CDS were pathetically weak, but they were.

I know. I’m a traditionalist. But. I’m all hopeful again. Congress has found their voice!
It’s whiny, that voice, and the Republicans are sort of jamming the populist signal with a lot of irrelevant chatter. But, it’s a start!

@bootlegger: In the interest of dialing it down a little so you don’t give the missus a black eye tonight, I see your analogy. I just think it’s stupid and hysterical. But yer not usually hysterical so we’ll call it an off night for ya and give it to Jesus.

Hush now Laura, we wise menfolk are trying to save the world. Don’t have time for cute. It’s all chest thumpin and a huffin’ and puffin’ with occasional crotch grabs (our own) for posturing.. Not that there is anyth… Oh never mind.

@J. Michael Neal: Ok, perhaps you are correct that we won’t get ’em all, but at least it’s within current law and we don’t have Congress responding with fake concern to make new laws. Also, I think there is more here than we know about and thorough criminal investigation would turn over many, many rocks.
The trades themselves were legal, the question is did the AIG financial products division try to cover up the losses to keep the ball rolling and/or did they use fraud in the course of making otherwise legal deals. Furthermore, those bonus contracts were signed in an odd timeline, like they had some inside information on when to pull the trigger to get the taxpayer to pay for it. This could constitute a conspiracy to defraud.
Peace.

@kay:
For nearly sixty-one years I have believed that the ship of state would always right itself. The last decade has made me wonder if it wouldn’t be wiser to dress in women’s clothing and kind of hang out near the lifeboats.

@Just Some (Whistles): Seriously? You’re going to insult me and just "call it a night"? Fuck you.
The analogy was not hysterical, it was perfectly valid, if the government can go after one unpopular group what’s to stop them from going after others? Your failure to see this is the only thing "off" about this night.

Sorry, someone who just started paying attention in 2005 and who gained his position through notariety is not someone that I want as the face of progressives — especially when he’s got someone like Mona Holland at his side. She will tell you that progressives are Nazis in a heartbeat.

Sorry, I was a progressive before Greenwald knew what he was and I was a progressive while Mona ran around posting on blogs trying to endear herself to the "leftties" — as she would call it.

The provisions Dodd rightfully pushed for were related to companies that received bailout (from here "TARP") money. But AIG’s deal with the government predated the passage of TARP unless I recall incorrectly. Precisely, bernanke using a very old power of the Federal Reserve (pre-FDR) to buy 80% of AIG without Congressional approval. This is not to say they disapproved but that it was never put to a vote and never signed into Law by the President. Simply, it was an inherent power of the Federal Reserve to do this. What’s more subsequent funds delivered to AIG were never described as being from TARP but instead from the Federal Reserve.

My point here isn’t to discuss whether Congress had the power to regulate the compensation at AIG. I firmly believe they did. What I don’t understand is the following: unlike the Banks (especially the healthy banks that took TARP funds at the Treasury’s insistence) what leverage could AIG possibly have? By the time this provision came up and Dodd encountered resistance along the lines of "The healthy banks won’t accept this, will decline TARP funding and then everyone will know which banks are unhealthy and we’ll have bank runs" why wouldn’t he reply "OK I think that silly but since AIG has no choice they are covered by the cap on executive compensation" In essence I don’t understand how anyone involved felt AIG was 1. involved in TARP properly 2. what leverage AIG had to say "no" to the people who owned 80% of their company.

@Comrade Stuck: Point taken, but in my defense I didn’t start the testosteronefest, though its always been a weakness of mine that when the other baboons start flinging poo and showing their asses I seem to jump right in.

The trades themselves were legal, the question is did the AIG financial products division try to cover up the losses to keep the ball rolling and/or did they use fraud in the course of making otherwise legal deals.

Actually, I think it’s pretty clear that there was fraud here, and that Cassano is in a world of trouble. I’m just not at all convinced that this fraud needed to involve more than a few people, and most of them are already gone and not involved in the bonus fiasco.

@Ailuridae: From what I’ve read and heard on NPR, AIG convinced enough powerful people that only their experts, i.e. their current employees, had the requisite knowledge to make sure that the dismantling went smoothly. They added that a smooth dismantling was in the taxpayer interest so that we got all the assets coming to us. They claimed they needed the retention bonuses to keep the supersmarties around. Personally I think its a load of hooey and any hungry MBA could have done it.

What it’s incorporated separately, as the guts at THP suggested? Wouldn’t it then not be part of AIG and therefore not be bound to honor the contracts, if the newly separated and incorporated company was thrown into bankruptcy?

I don’t mean to seem dense, but this stuff confuses me. I understand what you’re saying, but I also understand what the guys at THP are saying, and I am not sure what to think. I’m tempted to ask you what you think of this statement, from the same guys: "This leaves open the question of how to deal with all other obligations of the derivatives unit, including the notorious credit default swaps. We, like most independent analysts, are mystified by the determination of the Federal Reserve and Treasury to keep paying these off at 100% of their face value. But that’s an issue for tomorrow." But one step at a time, I guess.

@bootlegger: I don’t accept that homosexuals are an unpopular group now or eight years ago. I don’t accept your premise that they have bad behavior that requires taxing and there’d be a majority will to do this since we proved we could do it when we went after the AIG bonuses. I don’t buy your stupid slippery slope argument. I also don’t know what the hell money we’d tax ’em for since we didn’t give them giant bonuses for being gay.

Which is why I was arguing that the bonus fiasco wasn’t all of the picture. But the timing of the bonuses is still fishy, as is the argument for why they needed them, as is the amounts, as is the fact that so many bailed after collecting them. I smell fraud here too.

My comment wasn’t directed at you, just a general statement on the unruliness of testosterone. Though I’m trying to reform myself, in the not too distant past, I’ve been one of the worst at this. Though I still believe that riots are needed now and then to clear the air, I just wish we had more wingnuts come around for the cage matches, instead of ourselves.

**and from my earlier comments, I agree with your take on special tax crap we saw today.

@Just Some (Whistles): Are you telling me that the Fundies wouldn’t have done it if they could? The Bush administration fought the last sodomy statute all the way to SCOTUS and then they shifted to changing the state constitutions to deny legal rights to same-sex couples by popular vote.
What sugarplum land have you been living in? One where they shine turds I suppose.

From what I’ve read and heard on NPR, AIG convinced enough powerful people that only their experts, i.e. their current employees, had the requisite knowledge to make sure that the dismantling went smoothly. They added that a smooth dismantling was in the taxpayer interest so that we got all the assets coming to us. They claimed they needed the retention bonuses to keep the supersmarties around. Personally I think its a load of hooey and any hungry MBA could have done it.

With a lot of these kinds of trades, it really helps to know where the bodies are buried. CDS don’t have a standard contract, and there are all sorts of complicated clauses as to what constitutes a "credit event," and what exactly needs to be paid off when. My guess is that, at least in some of the cases, the only people other than these fuckers that understand the contracts are the fuckers that some other bank is employing, since they are the only ones that understand the contracts on their end.

This is one of the reasons that I want to find a way to get as many financial instruments as possible to be exchanged traded. If something trades on an exchange, there are standardized contracts, and it’s illegal to trade them without going through the exchange. People trade all sorts of exotic options over-the-counter, but your basic puts and calls aren’t, for any instrument that is on an exchange. (There are some stocks that are, themselves, traded on an exchange, but for which options aren’t.)

That doesn’t include CD S, which I think should be regulated as insurance, rather than as a trading instrument.

I actually don’t have any problem with Greenwald attacking Obama. He should feel free to do that.
I have two problems with him: he is one lawyer, and while he appears to be one smart lawyer, there are different approaches, and I don’t like taking his reading of events (or even law) as gospel. He also goes to intent (in my opinion) too quickly and without enough facts. Intent is difficult to discern, even from first-hand experience with people and events. He’s almost never speaking with the actual actors. He’s reading what I’m reading. Well, more, admittedly, but you get my point. Why does he always have a motive handy?
It bothers me too that he never admits that he got anything wrong. Not from what I’ve read, anyway, and I’ve read him a fair amount. He has to be wrong sometimes. No one lawyer gets it 100% right, unless they’re tweaking a little, making the result fit the prediction. That gives me pause.

@kay: That’s my biggest problem with Greenwald as well. The minute a story breaks he already seems to have found the culprit, and somehow knows all the who/what/when/where/why while everyone else is still trying to gather, you know, those pesky facts.

Maybe this is sort of related but not exactly on thread so apologies. One thing that has been really disconcerting and worrying to me is that a lot of progressive bloggers have taken to quoting headlines by CNN and AP etc, using this as an excuse to be outraged! without bothering to check what the actual interview or story really says. This is a good example as is the meme today that Axelrod said AIG does not matter, when in reality the interview shows he said something quite different. So what is it? Lazy reading is now catching on all over?

I wonder how the bosses at AIG’s insurance divisions felt as they watched the Financial Products people pile up so much risk that the entire company could not make it good should things go wrong. I can’t accept the idea that no one outside of FP knew what was going on.

Cassano: We’re exposed to trillions in losses if things don’t work out like you say they will.
FP: But if they do work out we’ll have more money than God.
Cassano: And if they don’t work out?
FP: You and I will still have almost as much money as God.
Cassano: Well, when you put it that way…

What it’s incorporated separately, as the guts at THP suggested? Wouldn’t it then not be part of AIG and therefore not be bound to honor the contracts, if the newly separated and incorporated company was thrown into bankruptcy?

The holding company is still responsible for them, and the other units are assets of the holding company. I don’t see how you can separate them.

"This leaves open the question of how to deal with all other obligations of the derivatives unit, including the notorious credit default swaps. We, like most independent analysts, are mystified by the determination of the Federal Reserve and Treasury to keep paying these off at 100% of their face value. But that’s an issue for tomorrow."

This gets us to the other problem. Quite aside from whether it would be legal to strip the assets and stiff the derivatives counter-parties, it’s probably not a good idea. That would throw all sorts of other companies into bankruptcy, and it’s impossible to say which ones they are. Further, not all of the counter-parties were actually gambling excessively. I lot of them sold contracts similar to what they bought from AIG, and used these CDS as hedges. In many cases, AIG was the, effectively, re-insurer rather than the primary. So, if they go into bankruptcy, companies that have balanced books, with the positions off-setting each other, suddenly have huge liabilities.

Some of the counter-parties aren’t banks or financial institutions. Pension funds bought these things, too. So, there’s a chunk of it that the government would just have to cover through the PBGC. Net of that consideration, the amount of the bailout is somewhat smaller.

It’s also an enormous foreign policy issue, given the number of foreign banks that would go under. Granted, I think that that means that European governments should be kicking into the kitty, but Iceland wasn’t a unique case, just an exaggerated one.

Mob outrage has a way of doing that. The two biggest threats to democracy are tyranny of the majority and mob rule. The former we handle with the Bill of Rights, the latter with a representative rather than a direct democracy. Of course it doesn’t work when the representatives decide to join the mob so they can win reelection.

Also, I think that there is a lot of outrage being wasted on these bonuses. We would be a lot better off if this effort was devoted to changing the system going forward than fighting over what is, proportionately, loose change you find in the sofa. $150 million is a lot of money, until you’re worrying about the whole economy.

He’s bagging on Dodd because his longrunning anti-PUMA battle has, clearly, taken a toll. He hears one word suggesting that Tim Geithner did something wrong, and it’s "Hillary" this and "They want Obama to fail" that.

@J. Michael Neal: I think its fair to look into it, see what can be done for now and what could be done in the future, but the ginned up lynch mob is certainly distracting from the bigger picture of finance reform.

this is exactly what I think we should be focusing on and why i think the Republicans want the outrage to continue but nothing done about it. The best that could happen is that Obama uses this to push a good regulatory system in place. Did you guys see the Think Progress piece about Boehner saying the problem the last few years was too much regulation? What a hoot these Republicans are.

@bootlegger:
Lamentably, what we’ll probably get is another toothless Blue Ribbon Commission. They’ll poke around the edges of who might be culpable but, at the end of the day, Glass-Steagall will stay repealed and the Commodity Futures Modernization Act will be untouched.

If any of the outraged pols had brought a bill reinstating Glass-Steagall immediately I’d have been much more impressed.

Honestly, I don’t think Glass-Steagal is a real difference maker. I’m in favor of bringing it back, but I’m not sure it’s on my top ten, let alone top five, list of things that need to be done. The concern is the system as a whole, and, while Glass-Steagal would make it harder for any one institution to be too big to fail, it doesn’t help if the whole industry insists on making the same fucking trades. If we had 300 banks all in little holes rather than 30 banks in big ones, we’d still be in the same place.

You raise a lot of good questions, ones that I’d like answered from the people who made these suggestions. This might be speaking too broadly, but as with any answer that seems too easy, I assume there’s more to it, because if the solution was as easy as some usually make it out to be, it would have already been pursued.

I agree that the pissing and ranting over the bonuses is really a sideshow, but at the same time, if the public rightly or wrongly feels this is important, it needs to be addressed. There are a lot of people who don’t really know what to make of all this and asked–not literally, of course–to take on a lot by supporting these companies. Public opinion turning against it may not prove to be the Achilles’ heel of the administration, but if the public is under the impression that what is happening is unfortunate but necessary, then it’s probably going to make what needs to happen easier.

What confuses me is the assumption by a lot of folks and MSM-types that the watering down of Dodd’s amendment is THE thing that opened the floodgates of bonuses and high salaries for the bailed out companies. That doesn’t seem like a valid assumption, to me. Any attempt to go back and change contracts, especially contracts that were entered into before the bailout, seems to me as though it would be doomed to failure…or, at least, a long, drawn out court battle.

The bonus thing and all the other gotchas and loose-ends should have been decided on before we handed the money out. They weren’t. To blame Dodd and/or the Treasury Department for the bonuses seems a huge stretch.

It IS kind of fun, though, watching Republicans trying to figure out which of two opposed sets of talking points to go with. They seem so conflicted and confused.

I think you’ve been a little glib when California passed Prop 8 last year. And in a country that locked up Japanese Americans during a time of war; i.e., high passions. Don’t think it can’t happen again.

@J. Michael Neal:
I disagree. If Glass-Steagal been in place then you wouldn’t have had savings banks, investment banks, brokerages and insurers all under the same corporate roof. Yeah, it would have been a mess but it wouldn’t have taken nearly the whole financial apparatus with it.

The one thing the right-wingers actually DO have right about the AIG fiasco is that the better way by far to have handled this was to force the AIG entity itself into formal bankruptcy, but with the government promising to pick up enough of the pieces from the bankruptcy trustee to reconstitute a viable enough entity to avoid its collapse causing so much adversely-leveraged collateral damage to the economy. A carefully planned, controlled, well-managed crash would have been far better than to artificially keep AIG alive in the ICU, while permitting many of the same blood-sucking leaches to drain it as part of the supposed "therapy" as caused the terminal illness in the first place.

A planned formal bankruptcy would have avoided any potential liability for COMPLETELY UNEARNED bonuses to these toxic clowns.

The enormous popular wave of outrage is ENTIRELY justified, and I’m not impressed one bit with the supposed logical and management and experience skills of Dodd, Geitner, or Obama in this affair, much as I otherwise am a fervent supporter of Obama.

A quick question that given all your knowledge maybe you may have info on (or anyone else). Is there any analysis of what countries have been hit less by the debt default swaps ad securatized inventions etc than others? And which where hit or not due to better regulatory systems and which fared better in spite of their regulatory systems not being that great? Just trying to think through this in terms of regulatory systems given the experience Latin American countries had in the 80s when the push was for almost total deregulation (and which most people agreed by the 90s had been too much).

What confuses me is the assumption by a lot of folks and MSM-types that the watering down of Dodd’s amendment is THE thing that opened the floodgates of bonuses and high salaries for the bailed out companies. That doesn’t seem like a valid assumption, to me. Any attempt to go back and change contracts, especially contracts that were entered into before the bailout, seems to me as though it would be doomed to failure…or, at least, a long, drawn out court battle.

I’ve asked the question before: during this court battle, could AIG conduct business as usual? Or would they be paralyzed by the ongoing court action? And could the substitutes for the people who are suing (and the plaintiffs would definitely not be working as the suit went on) get up to speed or could even conduct business as the trial went on?

As far as the CDS and derivatives trading, I believe I read the culprit there was P Grahams bill shortly after G-S was repealed, and a provision he tacked on to it that exempted such activities totally from regulation, which is why nobody knows how serious it really is. Though clearly quite serious.

I’m not impressed one bit with the supposed logical and management and experience skills of Dodd, Geitner, or Obama in this affair, much as I otherwise am a fervent supporter of Obama.

NO ONE (in the entire world, possibly) has the intelligence, management skills or experience to get out of this clusterfuck perfectly and without something blowing up in the wake. That’s not a defense necessarily, but a reality.

the problem with this idea is that there is no such thing as a controlled crash of AIG. This is why this is so thorny, no one wants to keep bailing them out but bankruptcy is not an option (this is what all economist say that I have read in the last few weeks).

@Dennis-SGMM: I don’t buy it. AIG isn’t a bank at all. Most of the foreign banks wouldn’t have been chartered in the US at all, so wouldn’t have been affected by Glass-Steagal. Lehman wasn’t a bank, in the sense covered by Glass-Steagal. It would have helped, but it wouldn’t have made the difference.

A quick question that given all your knowledge maybe you may have info on (or anyone else). Is there any analysis of what countries have been hit less by the debt default swaps ad securatized inventions etc than others? And which where hit or not due to better regulatory systems and which fared better in spite of their regulatory systems not being that great? Just trying to think through this in terms of regulatory systems given the experience Latin American countries had in the 80s when the push was for almost total deregulation (and which most people agreed by the 90s had been too much).

Yes. The countries that never got around to deregulating their financial systems are in a lot better shape. I’ve lost track of exactly which countries those are, though.

President Obama was trying to make a funny about his bowling game and he invoked the words "Special Olympics" as an analogy. If you go on memeorandum practically every wingnut blog you can think of has linked to Jake Tapper’s story and I am sure Drudge already has a siren up.

The AIG bonuses are one more proverbial straw breaking the camel’s back. Most Americans are changing their personal spending habits, many are in real financial jeopardy, and most of us are very nervous about the amount of money the government is spending. I believe that most of what Obama has proposed is probably necessary, but I don’t like it. But I am really pi$$ed that our financial overlords haven’t yet realized that they can’t keep running their gravy train on the taxpayers’ dollar. Some people may well argue that corporate jets, bonus plans, corporate play dates in upscale resorts, and remodeling lavish executive suites are de minimis but I think they are evidence that these executives are pretty clueless. Having a great party in Bermuda or the Caribbean was just fine when we blew the lid off the business plan and had some GREAT years, but they are totally inappropriate in the current circumstances. And they are destroying the political possibility for painful but necessary initiatives to avoid collapse while the financial mess is unwound.

I’ll be very surprised if anything close to today’s House bill actually becomes law because there is going to be some of the fiercest lobbying ever.

@TenguPhule:Banks and other firms receiving federal money were required to sign contracts stating they had no unpaid taxes, Lewis said. But he said the Treasury Department did not ask them to turn over their tax records.
Add another dozen Friedman Units to the time it will take to straighten this out.

If nothing else President Obama will be second guessed on every talking head show for going on Leno in the first place. I don’t even want to think about what Scarborough is going to do with this in the morning.

No but I have a sadistic obsession with the show. I know its not good for my health but I end up watching it every morning coming just short of throwing my shoe at the Tee Vee. And aside from FoxNews I am pretty sure that Scarborough will be the worst flogger of the story.

@sgwhiteinfla:
It will give Palin a chance to go into full Outraged Mother mode. I imagine that she and little Pinball Palin (Or whatever the kid’s name is) will be front and center on every television show in the land – thus giving several layers of meaning to the expression "Boob Tube."

I saw it too and you could barely hear it and i think he realized he should not have said it. But yes more bs we have to put up with. The whole thing went well though i thought. He was great and funny.

It was a dumb thing to say, and looks like the online reichtards are all over it with pearls a-clutchéd. Still Obama has the edge on Bush – jokes at the expense of retarded folks is better than executing them.

@Bootlegger: You need to update now that the Illinois/Western Kentucky game is over.

I’ll have to enjoy the fleeting glory of being in first place tonight (15 of 16), since tomorrow I’m sure I’ll go down in flames. If VCU had managed to score on that final possession I would have been 16 of 16.

I think me and you were the only ones to pick the Hilltoppers to beat Illinois. I only did, cause they are one of my several alma maters. I majored in Party Science and did well, until they informed me it wasn’t really an approved curricula. chapter 3 of a misspent youth.

Dodd is in bed with corporate interests. He lied on CNN about not putting that stuff into the bill and I defended him. The next day he was busted and admitted he did put the language etc into the bill… He must go.

@Comrade Stuck: At least you had a good reason to pick them. :) Mine was based only on the feeling that there had to be at least one pretty big upset of the day and that was one of two that I picked. Sadly, my other upset pick (VCU) went down the tubes at the buzzer.

Yes, the wingnuts are all over it, being the keepers of the PC faith. They are currently a huddled mass of sour grapes waiting for any reason to wine. And hypocricy is no obstacle for their faux outrage.

Seriously though… I got a little choked up that the President of the United States could sit down, and address the people AND politicians of an "enemy" country, and talk about peace and respect and responsibility…. (Ezra has a transcript).

Of course, all of this will be swamped in endless discussion of whether he is a muslim who hates people with disabilities.

I’m surprised you’re taking Al Giordano at all seriously, John. His tinfoil hat appears to be focusing the CIA microwaves a little too sharply these days, ’cause reading him is like watching Glenn Beck do a musical comedy version of Left Wingnuttia On Parade (and I say that as someone who has spent a lifetime to the left of Emma Goldman):
"The Sooper Sekrit agenda of the Greenwald/Hamsher/Sirota Kabal is to undermine Obama by appealing to Clinton-for-President dead-enders who will get Geithner fired so that the recovery fails because Republicans will get a second shot at blocking a replacement Treasury nominee!"
"But it doesn’t actually matter who’s at Treasury because Obama’s designing and executing the whole recovery single-handedly anyway."
"AIG already told everybody in November that they were giving exactly these giant bonuses to exactly the execs in exactly the unit that caused the whole mess, so everybody knew everything about this 6 months ago!"
"Geithner didn’t already admit to asking Dodd to put in a bonus exemption!"
"Dodd didn’t already say, yeah, he did that over his own better judgement!"

The comments on his own blog right now are pretty much destroying his thesis, which he’s desperately trying to defend to each new commenter. It’s kinda ugly watching the foam come rolling off his chin. Al, this is Houston, come in?

I don’t think they are keeping these guys because they are smart—heck we saw what the ‘very smart’ physicists did with their fancy economic formulas. It seems to me, that they think only guys who know what is there are the ones that can untangle the mess. I cannot pretend to know if they are right or not. My gut is that these guys need to pay for what they did but focusing on AIG only is a mistake. Why are the rating agencies skating and still acting as if it had nothing to do with them?

I’m going to take exception to this again. By and large it wasn’t the physicists who were abusing the formulas, it was the people who were cherry picking the quants research papers to get the raters to give these things AAA ratings. Sure, I feel these people bear some of the blame, but relatively speaking, it’s a small amount.

When people pointed out that this was MATHematical MODELS and NOT SCIENCE, they were told to shut up because everyone was making money hand over fist.

I’m going to take exception to this again. By and large it wasn’t the physicists who were abusing the formulas, it was the people who were cherry picking the quants research papers to get the raters to give these things AAA ratings. Sure, I feel these people bear some of the blame, but relatively speaking, it’s a small amount.

When people pointed out that this was MATHematical MODELS and NOT SCIENCE, they were told to shut up because everyone was making money hand over fist.

In my experience, the quants were every bit as bedazzled as the people reading their stuff, in part because they were making money hand over fist, too.

@Tattoosydney: I saw that this morning and thought it was awesome. Let the usual suspects wail about the "Special Olympics" crack. Just as all the flailing over the AIG bonuses is a distraction from the real issue of regulation, the Born-Again PCers of the right will be too busy today being Proper Christians over the Leno stuff to realize that the President just declared their wet dreams of a war with Iran dead, buried, and grave-pissed-upon.

Canada’s banks are pretty tightly regulated, and push their investing away from speculation and into actual venture capital type operations. This has made their profit smaller during the boom periods, but the banks are still doing VERY well right now.

And the Canadian economy is predicted to weather the economic crisis fairly well as a result.

And for what it’s worth, I agree basically 100% with what JMN is saying. But I’ll add one thing.

I think one thing that’s not talked about is the inherent moral hazard present in AIGFP’s payment system in particular, and to a broader degree most of the top 1%. If you can work for a short amount of time, acting in very risky ways as you are receiving bonuses that gain you financial independence for basically the rest of your life, there’s no motivation to act in a way that’s sustainable over the long term.

Some people bring up the autoworkers, and how they went back to the table, but that’s exactly the point. They had an inherent rational self-interest in the sustainability in the company they worked for. Their bonus and independence would come in terms of their retirement. Long-term thinking is a necessity for the middle class. (The lower class often don’t have that luxury)

The real question is how do we restore that sort of rational self-interest in sustainable business activities? And I’m not sure I have an answer for that. But that’s the question we should be asking.

One or another economist I read ( they’re all jumbled up: I can’t remember which one) wrote that we already had our "lost decade" and it was the last 10 years. That the gains were illusory, we were treading water or sinking, and we simply declined to take the hit when the loss was occurring. It’s one way to look at it.

Speaking as a pure pedestrian disenfranchised individual, I’m sitting here unemployed, looking for work, of course. Watching the bill pass yesterday made me feel good. I wonder how many other people in similar circumstances felt that way.

As for this Giordano person:
People like Greenwald and Hamsher are brilliant, hard working bloggers and I have the utmost respect for them. Just because I used to read them does not make me the equivalent of a Rush or Beck follower as this Giordano person suggests. That’s insulting as fuck, especially as I sit here, again, unemployed and struggling – one who has finally stopped trying to follow all of this bullshit as I am exhausted with the game. Suck my nut, I say (if I had one). Anyway, the Greenwalds and Hamshers of the world perform an important function in a democracy and I am thankful they’ve been around these last few years, even if I don’t join them in every "poutrage" because I am just too damned tired and worn out and am just trusting my president at this point, like a little child.

And I liked the tax, in a purely one-dimensional, starry-eyed, slobbering populist kinda way. It felt good. I’m down with it.

Giordano is an idiot. I know of no one who wants to oust Geithner because we want Obama to fail. We want to oust Geithner, because we are afraid that with him in charge that Obama will fail.

Giordano’s counter to this is that Obama is really the one calling all the shots on the economy, and that Geithner is just carrying out his orders. This is the most naive bullsh*t I have ever read a blogger post. I guess we should blame Obama for marginalizing Volker as well then, eh?

Al Giordano says nonsense, and I am being played the fool. Which should not be surprising to anyone at all.

I think there’s plenty of over-reaction on all sides, and just about everyone I’ve read on the matter could do with making more effort not to jump to conclusions. On the one hand, Jane Hamsher and Greenwald marshall very little evidence that there was any deliberate effort within the Obama administration to blame Dodd or throw him under the bus (I thought that phrase had been banned?). Perhaps there’s more to it, but the single quote they presented wasn’t very convincing; it didn’t even sound like an attack on Dodd, more a, we looked at all the options and couldn’t find any way to block the bonus payments. Now obviously they’re not going to be drawing attention to the administrations opposition to retroactive limits on executive compensation now that its exploded, but I didn’t see an attempt to hand Dodd out to dry, at least not a conscious one (though some Republicans did take it up and run with it, even though they opposed limits on executive compensation more than anyone). On the other hand, Al gets a bit spittle flecked himself working into a lather over the cabal to take down Obama. He even manages a dig at Krugman who wasn’t even involved. I read and enjoy all the blogs involved, and none of them is gospel.

I like Greenwald and Hamsher too and ironically enough I am not as big a Giordano fan, but in this instance his words have credence. I had an email back and forth with Greenwald over this (he answers just about anyone’s email) and when I pointed out that in black and white terms Dodd definitely lied Greenwald came back and said he didn’t really think Dodd lied but that he was just mistaken. How in the hell do you say one day that you had nothing to do with changing the language and then the very next day said you were the one who changed it and not have it be classified as a lie? Not only did Glenzilla not post a correction, he instead tried in a very convuluted fashion to try to claim that Dodd changing his story was just more proof that it was all Treasury and Geitner’s fault. Nevermind that Dodd never explained what the White House had over him that they could compel him to change the language. Nor did he explain why he lied in the first place. And biggest of all it doesn’t explain why nobody but Dodd seemed to know about the change even though he wasn’t even involved in the conference.

Jane on the other hand hates Rahm Emanuel and was never keen on Geitner because of his Wall Street ties and she tends to blame one or both of them for every single problem. She had a post up a couple of weeks back totally misstating what Rahm Emanuel had said about the big three and their health care plan. When I posted in comments on her blog what he actually said in context and how it ran exactly counter to her post which suggested that he was saying the Big 3 shouldn’t have offered their workers health insurance she never posted a correction. His actual point was that if we had health care reform or universal healthcare then the Big 3 wouldn’t be saddled down with those insurance costs and they would be a more viable company.

Now I still have a lot of respect for both bloggers but at some point they are going to have to show the ability to admit those few instances when they are wrong. Otherwise they are going to begin to lose credibility even though on most issues they are spot on.

Am I really the only one that watched the last eight years, and came to the conclusion that the government unilaterally voiding contracts and writing legislation to target enemies is a bad idea?

Sorry I’m late to the discussion. My two cents, I don’t like the bill to tax away the bonuses. I prefer applying existing laws and having good legal frameworks, rather than making up punishments as we go along.

At the same time, there’s a weakness in our legal system: there’s no mechanism for taking over AIG the way the FDIC can take a bank into receivership. Taxpayers should not be on the hook for promises AIG made before we took them over; as others have pointed out, without our money, there’d be no bonuses to collect (or at least they’d have to get into line at the bankruptcy court).

If a business fails badly and is so important to the economy that it cannot be allowed to enter bankruptcy, there needs to be a legal mechanism in place that makes clear what happens, and part of what should happen is we get to re-negotiate contracts. I understand Obama is pushing something like this, and that’s a good thing.

The bonuses involve relatively small amounts of money, but what frightens me is the attitude they reveal. We’re treating AIG as though it were a self-sustaining ongoing business that’s just taking some loans, that is fully responsible for the bad previous decisions they made. Only they aren’t so we’re responsible for decisions they made.

And so we’re pumping billions of dollars into other banks who bought CDO’s with them, paying off their bets. And we’re paying them off in full. Is this a good thing? I have no idea. Maybe this is an effective way to prop up the economy, but as we’re giving the money, I’d like my representatives to know in detail where it’s going. Bear in mind that you can buy this insurance without buying the securities it ensures, essentially betting the against the housing market? Are we paying billions of dollars towards cagey investors who bet against the housing market? I’d like a definitive answer to that question.

Al Giordano seems a bit defensive and irrational.
He’s bagging on Dodd because his longrunning anti-PUMA battle has, clearly, taken a toll. He hears one word suggesting that Tim Geithner did something wrong, and it’s "Hillary" this and "They want Obama to fail" that.

It’s pretty off that he accuses Greenwald and Jane Hamsher of being pro-Hilary or pro-Edwards anti-Obama types, which is flat out wrong. Jane campaigned actively and enthusiastically for Obama and Glenn was obviously for Obama, with major libertarian reservations.

The problem really, seems to me, to be that there is an enormous pile of shit here. Some people are digging through the shit looking for the pony, while other people are looking around trying to find the owner of the horse that dropped all this poop. No one knows what the hell is going on, what to do about it, and what the result of any actions taken will be. There are lots of theories and hopes, but no one really knows. Everyone is nervous as hell and a bit riled up emotionally because the shit pile is scary and very stinky, so it’s very easy to get people pointing fingers and yelling a lot. In the midst of all this we have Geithner, who may or may not be taking the right actions, but whose personality doesn’t reassure and who doesn’t have a gift for politics…serious liabilities when everyone is so het up and needs direction and soothing.

What actually went down with the "bonus provision", who did what, with what motivations, is difficult to figure out — it’s much easier and more satisfying to point fingers and yell "off with his head". There’s plenty of blame to go around.

sgwhiteinfla: I agree it is important to admit errors, but if the right were to do this, we’d be listening for centuries. Worst case scenario: it’s possible that their egos have gotten too large for either of them to admit when they are in error. It’s still up to the reader to challenge them, as you did and eventually, the truth rises to the top. imho, that’s the beauty of the progressive blogs, god love ’em. But to be honest, I don’t really care about all of this beyond the fact that the American public is finally finding out just exactly what trickle down economics is really all about (as corporate urine trickles down on their heads). That’s all I’m about these days. Can’t deal with the minutiae – you guys do it, you’re better at it than me. :)

Not only that, but I heard Larry O’Donnell say something I hadn’t thought of but thought quite likely once I heard him say it. Keith O had him on to discuss his hilarious confrontation with Eric Cantor on Morning Joe yesterday (and if you didn’t see that, you absolutely must…it’s pure gold). And his take is that Pelosi played this brilliantly. He says she knows the Senate will never pass this or even let it come to debate. What she did was force a bunch of House Republicans to vote for the largest single increase in history. And that’s absolutely what the effect of that vote yesterday was, regardless of whatever else it may have been. Politically, it’s a WIN because it undercuts any narrative the House GOP has for being anti-tax.

Let’s appoint AIG execs to the cabinet so they don’t have to pay taxes !

Seriously folks, here’s an interesting set of facts:
1. Dodd’s father one of only two Senators (the other being Joe McCarthy) censured by the Senate (does the apple fall far….?
2. Dodd top recipient of AIG campaign contributions
3. Dodd’s buddy convicted of insider trading
4. Dodd gets sweetheart deal from Countrywide while chairing banking committee

How much more evidence to justify a return to that ethics committee?? Write YOUR senator now.

I am not blaming the quant guys for this–though they were pretty happy to go work for these firms and develop more formulas–I am blaming people who revere quant guys as if they were infallible because numbers seem an obscure number to them (i see this all the time in my little corner of academia).

I think there is enough blame to go around.

And not that Giordano needs defending but it does seem to me that Sirota Hamsher and Greenwald have been the first out of the gate not 2 days after Obama was inaugurated screaming ZMOG! Obama is just like Bush and a failure.

no, no one can explain.
it is VERY complicated.
and "one" would need perfect knowledge.
instead various parties "know" various things.
and so many people can claim to discuss "things".

but there is very little explaining going on.
it’s just more sound and fury.
say whatever you want and somebody will disagree.
and write many words.
but forget explaining.
we don’t even have a consistent set of facts.

I can’t even read Giordano anymore. He was pretty solid during campaign season but he has since jumped head-first into the deepest end of the tank for Obama. I support Obama, but I am not slavishly devoted to him the way Giordano is. There’s nothing so bad Obama could do that would not warrant ten paragraphs of the most fervent defense of his actions from Al Giordano. He could drop ten tons of bombs on Paris and to Giordano it would be all part of the plan to save the economy.

The dems knee jerk reaction to passing a special tax, was not only dumb, and maybe not legal, it also gave the wingnut’s the meme of confirming their perennial allegation that democrats are dangerous taxers.

The dems move really reminded me of Terry Schiavo. Sad. I think Leno had it right that it seemed scary that congress would go and after something like that. Those executives are socially fucked right now. Nobody will touch them with a 10 foot pole. They are persona non-grata in our society as the biggest worms.

The problem really, seems to me, to be that there is an enormous pile of shit here. Some people are digging through the shit looking for the pony, while other people are looking around trying to find the owner of the horse that dropped all this poop. No one knows what the hell is going on, what to do about it, and what the result of any actions taken will be. There are lots of theories and hopes, but no one really knows. Everyone is nervous as hell and a bit riled up emotionally because the shit pile is scary and very stinky, so it’s very easy to get people pointing fingers and yelling a lot.

The guy who said this is wise.

You know who I don’t get?

Sorry I’m late to the discussion. My two cents, I don’t like the bill to tax away the bonuses. I prefer applying existing laws and having good legal frameworks, rather than making up punishments as we go along.

No offense, but this is stupid. There is no existing law, or we would have used it. There’s no pony. It’s this or paying bonuses to jerks we’ve already given billions of dollars so they will fix their trillion-dollar mistakes.

This is a bad precedent, letting Congress use coercion so the mob will look the other way.

If a group is unpopular and people don’t like them, Congress should act to tax them for their bad behavior. In case B: substitute homosexuals for unpopular and unliked.

Again, this is dumb. This is not a new power to Congress. They’ve had the power to tax since 179-whatever. No, they can’t do this targeted at homosexuals, please see the 14’th Amendment. But if they want to tax people who buy cars, or Bon Jovi tickets, or work in brothels, they can, and do, do this all the time, and at any rate they please. This is not a bill of attainder. It was not targeted at a specific group of "enemies". It was targeted at employees of corporations who have received more than X billion in government money. This is also NOT abrogating a contract. The contract has been honored, and then been taxed to death. It’s actually quite smart. There’s nothing in the contract saying "And the government promises not to raise your taxes".

But I actually preffered abrogating the contracts. As someone else said, we OWN AIG. We can cancel any bonuses we da*n well please, tax them to infinity, or anything else the CEO could do, because Congress IS the CEO. Can you imagine this farcial bed-wetting taking place if Carl Icahn or a hedge fund has bought AIG? Those fuckers can buy as little as 30% of a company and begin dictating policy to the CEO. When Carl Icahn buys a company and starts slashing salary and you don’t like it – don’t let the door hit you in the a** on the way out. Let the fuc*ers sue. The changing circumstances are "since we signed this contract, we became insolvent. Sorry. This is the government’s money, and we had no legal right to promise the government’s money to you".

Getting tied up in this weepy crap about contracts is insanity. Legal mysticism aside, this is compensation. Congress can set any tax rates it wants, it’s the fucking government. It can absolutely set tax rates on income earned by working for government-owned companies.

Setting up this false choice between "let AIG go bust" or "honor your contracts" is a lot like making a false choice between charging an ax murderer with your bare hands when you first lay eyes on him, or else renouncing your right to brain him with a fire extinguisher when he’s not looking. We couldn’t let AIG go bust because it was too dangerous, but we were fucking obligated to do everything possible to prevent the employees from personally benefiting from their hostage taking.

I especially love the people saying "well, we shouldn’t tax their extortionists contracts… but we should EXECUTE them!!!" Seriously, grow up.

I’m trying to find Al Giordano’s real contention. His most substantive argument is that Greenwald, Hamsher, etc. used overly categorical language, and as other commenters pointed out here, ascribing motive (especially quickly) can be dangerous. However, many MSM accounts on Dodd, the amendment and this entire affair were indeed misleading. Giordano apparently has some bigger feud here, and his characterization of their posts does not match at all with the key points I took from them. Also, equating Greenwald, Hamsher and their readers with the Fox News crew is ridiculous, as is the accusation that these bloggers want Obama to fail. Does Giordano really believe any of that? Really?

The AIG bonuses can be a distraction, and there’s some remarkable hypocrisy from GOP leaders over them in claiming they wanted oversight and limits when they fought against them earlier. Both parties are overly beholden to corporate interests, even if one is worse. Discussing the bonuses should lead to a more thorough assessment of AIG’s conduct overall, and a deeper critique of the bailout money and recovery plans. AIG appears worse the more one looks, and as with the big "zombie banks," I hope there’s serious discussion about temporarily nationalize some of these institutions, putting them in receivership, stricter guidelines and oversight, transparency… On AIG and the bonuses, Dean Baker has a good piece, in large part because he gives context and digs into some of the bigger issues.